4.4.1 Contractual liability

It depends on the structure of the securities issue whether the issuer is the contractual counterparty of the investor. If the IPO is structured as a guichet issue, the sponsoring banks act as an intermediary for the issuer and the laffer is the counterparty of the investor to the securities sales contract. If there is an underwriting agreement between the syndicate of sponsoring banks and the issuer, the securities are actually issued to this syndicate. The subsequent resale of the securities to the investors makes the sponsoring banks the contractual counterparty of the investors. In practice, only professional investors subscribe in their own name and at their own expense. Non-professional investors give an order to their securities broker to subscribe for the securities on offer. It is the broker that acts in his own name and at the investor 's expense. For that reason, the broker is the contractual counterparty to the securities sales contract. He can therefore bring a contractual claim against the issuer or the banks. The investor can (request the court to) rescind1 the contract with the issuer or sponsoring bank respectively and/or demand payment of damages2 on the basis of error of facts (erreur sur la substance),3 fraud (dol)4 or breach of contract (inexécution contractuelle)5 if the contract creates reciprocal obligations.

As already mentioned, it is not very likely that the unprofessional investor has a contractual relationship with either the issuer of the securities or the sponsoring banks. Only professional investors subscribe to the securities on offer in their own name and at their own expense. Furthermore, the securities brokers are party to the securities sales contract. Therefore, the discussion of prospectus liability claims is limited to claims in tort.